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American Express and the Bare-Knuckle Tactics of Card Issuers

David Lazarus at The Los Angeles Times asks a question I’ve been wondering about myself: What are some credit card companies thinking?

Lazarus points specifically to American Express, which seems to be going overboard in its eagerness to pare customers who might pose default risks. The problem is that some customers are anything but risky, yet they’ve been aggressively shown the door. In some cases, customers have been asked to provide American Express with copies of their tax returns to prove their continuing creditworthiness. How does this pay off? All American Express seems to be doing is ticking off customers who will get another card somewhere else.

AmEx, which pocketed $3.4 billion in bailout cash from taxpayers, seems to have been especially successful at making customers feel unwelcome.

I wrote Sunday about a Los Angeles man who had his AmEx credit limit slashed twice by the company and then had his card canceled, all because of a “serious delinquency” in his credit file that apparently no one but AmEx could see.

I’ve since heard from numerous others who related similar experiences, including some who said AmEx even demanded that they send in copies of their tax returns if they wanted to keep their accounts — a notion so outlandish that I was sure it had to be a scam.

And demonstrating that AmEx isn’t just pushing around middle-class cardholders, I spoke the other day with Beverly Hills resident James B. Davis, who runs a publishing company with about $16 million in annual sales. He said he holds three AmEx Platinum cards, one for personal use and two for business.

Davis, 61, recently received a letter from AmEx saying it was canceling a benefit allowing him to carry an extended balance on certain travel expenses. It said this was due to an unspecified problem with his credit file.

“I have no debt — zero,” Davis told me. “So I called up my credit file and went through all 40 pages of it. I kept seeing ‘Account in good standing,’ ‘Account in good standing.’ Every account was in good shape.”

Davis eventually found out he was late with a single MasterCard payment – three years ago. And an AmEx spokesperson confirmed that tax return requirement isn’t a scam — it’s a new requirement for some cardholders. The spokesperson said she couldn’t understand how anyone would be offended by being asked for their tax return.

You might argue that it’s unfair to criticize AmEx and other credit card companies for being tough now, when they took so much heat for being overly lax in recent years. It’s great companies are being a little more discriminating. But AmEx’s tactics go far beyond prudent lending. It’s hard to see how arbitrarily cutting off good customers is going to benefit the company in the long run.

American Express, in particular, used to run commercials pushing the notion that it was a sign of privilege and responsibility to hold an AmEx card. Now its strategy seems to be purging worthy customers.

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